Salemead plc is a builders' supplies company located in Luanshya and has suffered quite markedly from the effects of the recession. It is now seeking additional long term funds in order to safeguard its financial position and to help it to move into new markets.

Its summarised financial statements for the three years to 31 December 2016 are shown below.

Profit and Loss Account for the Year (K000s)

201420152016

Sales18,50015,90015,100

Cost of sales10,5528,5377,970

Gross profit7,9487,3637,130

Distribution costs2,7752,8912,768

Administration costs4,4884,2624,205

Operating profit685210157

Interest706555

Net profit before tax615145102

Corporation tax30318__

Net profit after tax312127102

Dividends560163163

Transfer to reserves(248)(36)(61)

Balance sheet at 31 December

201420152016

Fixed assets:

Land and buildings1,3431,3431,126

Equipment and

motor vehicles1,4481, 1101,135

2,7912,4532,261

Current assets:

Stocks1,8981,7452,287

Debtors3,1693,2133,168

Cash and bank balances54325841

5, 6105,2165,496

Less: Current Liabilities

Creditors2,8732,5672,726

Taxation20010-

Dividends300100100

3,3732,6772,826

Net current assets2,2372, 5392,670

Total assets less current

liabilities5,0284,9924,931

Long term loans800800800

Net assets4, 2284, 1924,131

Share capital (K1 shares)2,4002,4002,400

Reserves1, 8281,7921,731

Shareholders' funds4, 2284,1924,131

Required:

Calculate such ratios as may be helpful in judging the performance of the company in terms of profitability, liquidity and efficiency over the three years to 31 December 2016. Present your interpretation of the company's results over the three years.(Total 25 marks)